Monday, August 09, 2010

Succession Planning - Are Indian Companies Ready ??

The tallest leader from the Tata Group for him is Jamsetji Tata. "JRD Tata is a legend, but the one who fascinates me is Jamsetji. His combination of influences, ideas and philosophies that he brought together and then made them work in practical terms, coupled with sheer single-minded commitment to India, at a time when the idea of India itself was emerging, is indeed special." In his recent work, TATA The Evolution of a Corporate brand, Morgen Witzel, senior consultant with the Winthrop Group of Business Historians, unfolds the story of the Tata brand in 200-plus pages. Witzel tells Sarika Malhotra, as the group is expanding its global footprint, it is the very high level of self awareness in the group that is making all the difference. "The group is aware of the challenges it faces very strongly. Throughout its history it believed in actions rather than words." From a branding perspective, even as the Nano has done the Tata brand a whole deal of good in terms of exposing it to the world and making them aware of it, however, the key challenge Witzel points out is to get the Tata brand in the open and make the transition form an Indian brand to a global brand, "that purely in branding terms is a task of the next ten years". Excerpts:

What makes for Tata's success as a brand?

Every big successful business chooses its own way to success. What made the Tata brand so successful is that the fact that they started off with a very strong set of values which were embedded in the group from the very beginning right from the time when Empress Mills was founded by Jamsetji Tata. And which the group stayed very much true to, down to the decade that followed. Strong brands are always built on strong values, principles and ethos and then communicating and sharing them with stakeholders. The Tata group has been really successful in doing that over a long period of time, consistently well. And that also has to do with consistency of leadership only five chairmen over a period of 140 years.

Succession is a very important issue at the moment and the big question is what after Ratan Tata?

Well, it's a great story and it's going to run and run. And my suspicion is that this decision is not going to be made that quickly. Having said that, one is sure that continuity of leadership is going to be a very crucial factor. When you look at other successful brands around the world, you see that the time of change in leadership is very often the time when companies have to track the value of the brand very carefully. For the Tata brand to continue to be successful and strong, it will need a leader who can carry on those values. Any succession is difficult at anytime for a large company, especially if you have had a long lasting and successful and dynamic leader at the helm. Look at the succession of GE when Jeffrey Immelt took over from Jack Welch, that was a thing that people discussed endlessly.

Any takeaways for the new leader?

It is very interesting to look back at the Tata Groups's history and learn from there. What were the challenges that Dorabji Tata faced when he took over from Jamsetji? Did he continue on the projects that had begun like the Taj and Tata Steel (TATASTL.BO : 531.2 0) and bring them forward and make sure that all the hard work that went into building these went on? JRD, in turn, had to build on that foundation at a time when the group was getting diversified and it was coupled with the challenges of independence and involved adapting to a new business environment. Go back and look at how JRD responded to that. Another sea change was with economic liberalisation, which coincides with JRD stepping down; how did Ratan Tata respond to that. Look back at the past leaders, how they responded and take lessons from that. It's often said the first thing a business leader should do after taking over office is to start looking for a successor. The one thing that distinguishes long-lasting business is the ability to locate in a timely manner a good successor ready for office. And GE is a pretty good example of that. GE down through the decades has had a succession of very powerful and dynamic leaders who were brought in the process early.

You mention how Tata's Corus acquisition of 2007 confirmed Tata Group's global aspirations and that it was strong enough to compete with global giants and how the Indian media led the way by creating stories about Tata's global ambitions and helping create a perception of Tata as a global player, a perception that is a bit over exaggerated at the moment. What made you say this?

In recent years, Tatas have expanded overseas, now at least 60% of their income comes from outside of India. They are much more involved in international business than they were ten years ago. Some of the press I was reading a year ago suggested that Tata is now widely recognised as a global business. But I am sorry to say it isn't. It's on the road to being a global business. In fact, there are very few truly global businesses. Coca-Cola, IBM, P&G, Microsoft only a dozen can claim to be truly global. Most businesses are working towards it. Tata is on its way to becoming a global business, but it isn't there yet. I also reckon that the India press on the whole exaggerates the awareness of the Tata brand overseas, which is very patchy outside. There will be people on the Tata Consultancy (TCS.NS : 864.7 -13.15) street not knowing they are using Tata Consultancy because they will be using them as clients or competitors. But if you ask them, what do you know about Tata group, the brand, do you know that a majority of Tata Sons is owned by a charitable trust? Most of them would not. They don't know what the values, history and traditions are. Same in the steel industry, same in the chemicals industry they know their bit of Tata but they don't know the whole culture. But when that changes, you will see Tata make the transition from being an Indian to a global company with Indian roots.

You point out that in the late 1980s the group was disintegrating and was marked by factionalism. How did the turnaround happen for the group?

A decision that Ratan Tata took initially was that the group needed to be not centrally controlled, but to be more united. And the brand was absolutely crucial in this. One of the key things he said regarding a corporate brand is about uniting the group and not about controlling the group and making sure that people share the same values. And that was a pivotal moment that brought the group back to its heart and beginnings and that I believe laid the foundation for the growth of the group ever since.

So do you credit Ratan Tata for the brand image the group has acquired?

Among others, yes. Prior to the 1990s, Tata made no attempt to develop a corporate brand. Ratan Tata had said, "We had a reputation, but we did not have a brand." I think it was his insight and his commitment to the idea that made it happen. As a leader he led the way in brand building through various exercises. His commitment to quality and innovation reinforced the brand and he emerged as the champion of these. And this has been one of his most significant achievements in many ways to get the message to the heart of the Tata group.

Like other global leaders, during his recent visit to India, David Cameron also visited Infosys (INFOSYS.BO : 2864.05 0). Given the rising trend, how do you position a relatively younger company like Infosys vis- -vis the Tata group?

Outside of India, Infosys stands for a lot of things that India stands for today. Western people think of India as a place of very high calibre and quality in IT and software solutions. Infosys in brand terms has been a world leader for a long time in this sphere. Infosys, TCS and Wipro (WIPRO.NS : 432.95 +1.75) have gone up from India and made a name. I remember a report three years ago from a big international management consultancy which said that India is very good at soft skills and software management, but India is very bad at heavy industry, whereas China is very good at heavy industry but not very good at research and development. Which is just not the case. China spends more on R&D per head of population than the US does. In India, the Tata and Birla group are very good at every industry and are very innovative. But perception is everything. And the perception in the West is that India is not good at heavy industry. Tata brand has been able to make an impact outside India with TCS. Tata Motors (TATAMOTORS.BO : 894.35 +33.5), Tata Steel and the likes have been relatively less known outside India because of the perception that India only does software good. Everything about brands is about perceptions. The brand is the sum of perceptions that everyone has about it it's the experiences people have of products and services, it's the stories people tell each other about them. And brand India today is just associated with IT and outsourcing, but nobody knows yet just what India can do in building cars, watches and engineering and mechanical things.

You refer to the Tata group as being 'good and great', indeed a special combination that carries immense expectations. Any lessons that other corporate houses can learn from the group?

Every great brand is unique in its own way. The key things to learn are absolutely delivering on your promises day in and day out. As Ratan Tata says, 'If you fail to do what you promise, then everything gets thrown away. Your words then have no meaning to anyone.' The other thing is to recognise that business are not their just to serve shareholders and customers. They are there to serve the customers, employees, shareholders, suppliers and the community at large. And you ask any expert on branding and they will tell you exactly the same thing. You have to build a 360-degree view and balance the needs of everyone. Yes, it's a huge expectation to live up to. But such expectation is placed on every great brand. Apple, Toyota, Nokia live with this. And Toyota last year struggled when it appeared that it was not living up to its customers' expectations. So it's for every brand to keep living up to its customer's expectations. Find out what your customers want, deliver it to them day after day, month after month and year after year and in the process exceed their expectations. And that's the secret of good branding. It sounds pretty simple, but it's actually very hard to execute consistently over time.

You interestingly refer to an instance when other Indian groups were making mansions, the Tata group was building a cancer institute. Lesson in brand building here?

Again, it's about perceptions. These two developments were reported in the press almost together. It's very obvious when people think about the Tata's they think of one thing and when they think about other business houses, they think of other things, simply because that's what's being reported and talked about. So it could be a matter of how you manage your image, what stories go in the press, but it's also a question of your actions. I am not passing any judgments either way, how people spend their money is up to them. But it's a matter of the image you present to the world at large and the images are different in the two cases. And that in the long run go towards the perception of making a brand.